Seeking ROI? Kick-start Efforts With Pilot Projects
When Budgets Are Tight, Test on Small Scale and Roll Out Wide to Maximize Returns
Published: September 28, 2009
With the World Bank forecasting that this year will bring the first decline in global GDP since the Second World War, the pressure on marketers to do more with less is enormous. As a result, long-desired ideals such as accountability, marketing-mix optimization and returns maximization have become priorities and are top-of-mind in boardrooms and C-suites everywhere.
For all the urgency and openness to change created by the global recession, transforming these ideals into realities is more difficult than ever. First, many marketers have been charged with reducing marketing spend immediately; they do not have the time to develop the capabilities needed to act precisely and with a clear understanding of the implications of those actions on volume and profit. Second, a marketing return-on-investment capability — the basis for accountability — requires investment, and right now resources are in short supply. Third, even when the desire and the will to be accountable are present, there are key challenges that often block marketers’ progress. These challenges are encompassed in three dichotomies:
This combination of conditions can appear insurmountable. Indeed, many marketers are treating accountability and the optimization of mix and return as unattainable ideals because of them. On the other hand, as we researched for our new book on marketing ROI, we found that there are marketers at companies such as Kellogg Co., Unilever and LG who have overcome these barriers. And one thing that they all have in common is that they kick-started their efforts with pilot projects.
Pilot projects are always a smart idea, but they are essential in times like these, when marketers must stretch budgets and minimize risks. When properly designed, pilots enable you to capture real benefits quickly. Better yet, once an action’s benefit is proven, it can be immediately extrapolated and rolled out at a scale to maximize returns and then leveraged to support the long-term development of a marketing ROI capability. Pilots also allow you to evaluate your organizational capabilities — identifying strengths and, just as important, pinpointing weaknesses. To capture all of these advantages, marketers should consider these guidelines as they plan and undertake pilot projects:
1. Seek real savings. To gain the attention of senior decision-makers and clearly demonstrate the potential savings, pilot projects need to be positioned within a major spending category. For instance, when Kellogg Co. first decided to develop its marketing ROI capabilities, it focused its pilot on trade promotions for its cereal business in California, which served as a microcosm of the U.S. market. Pilots should also encompass several marketing vehicles or brands to test the breadth of their applicability and support the learn-extrapolate-roll-out process.
2. Get buy-in to capitalize on success. The larger purpose of the pilot project must be effectively communicated to senior management. We have seen companies run a highly successful pilot that saves a few million dollars, congratulate all concerned and then go back to business as usual — leaving hundreds of millions in potential savings on the table. To avoid this, the pilot needs a champion who can place it in the proper context, shepherd it, and use it to drive the larger marketing ROI program afterward. This champion will help senior management understand the level of change required to create an ROI capability and build organizational support for the initiative, including a well-thought-out plan to scale the capability if the pilot is successful.
3. Identify technical, organizational and skill gaps. Before undertaking a pilot project, marketers should ensure that it is designed to reveal any gaps in the company’s ability to implement and execute a full-scale marketing ROI program. This means that it must test for the essential elements of the capability — the four pillars of analytical prowess, decision-support tools, embedded processes and organizational alignment. Without the support of each of the four pillars, ROI capability cannot develop into a full-fledged organizational capability. But these pillars are always present in varying degrees in individual companies. Accordingly, the pilot program must create a deeper understanding around which pillars are already in place, which pillars will need renovation and which pillars may need to be built from scratch.
4. Seek help, but minimize costs. Marketers typically need outside help when creating marketing ROI pilot projects, especially when they are not experienced in gathering and preparing data, building analytical models and designing decision-support tools. These can be expensive endeavors, but the costs can be controlled. There is currently an explosion in marketing ROI models and tools, many of which can be purchased “off-the-shelf” and customized at a relatively low cost. And the analytical prowess necessary is also available on a contract basis. With some careful shopping, successful pilot projects can be created for a reasonable investment and should deliver a return of five to 10 times that investment in six months or less.
Far too often, the idea of developing a marketing ROI capability and driving accountability through that function is treated as a platitude rather than an essential for success. This recession has reaffirmed accountability’s position at the top of the marketing agenda. Marketers who move quickly and thoughtfully now to initiate and build a marketing ROI capability can obtain traction and impact with relatively small investments and earn huge dividends in the future.
|ABOUT THE AUTHORS|
Leslie Moeller and Edward Landry are partners at Booz & Company and the authors of “The Four Pillars of Profit-Driven Marketing: How to Maximize Creativity, Accountability, and ROI (McGraw-Hill, 2009).”